Jun 30, 2016

A "Franchise" Defined under Korean Law: Franchise Law Basics

Franchise Law in Korea
Korea Franchise Law 

Korea has a very broad definition for a "franchise."  The definition of a franchise is noted in Korea's Franchise Act and has been fairly consistently applied by the courts and Korea's Fair Trade Commission.  

Korea's Franchise Act defines a franchise as:
"a continuous business relationship in which the franchisor allows the franchisee to sell goods or services under certain quality standards and business method using its trademarks, service marks, trade name, signs and other business marks ("Business Marks") and supports, educates and controls the franchisee with regard to relevant management and operating activities, and in which the franchisee must pay franchise fees to the franchisor in return for the use of the Business Marks and the support and education concerning the management and operating activities." 
This broad definition of a Korean franchise leads to most relationships where a company owning Business Mark maintains a degree of "control" over another company as a franchise relationship when a fee is charged for the use of the Business Mark.  The definition has been interpreted broadly by the courts and the Fair Trade Commission of Korea.

All franchises, in Korea, must be registered with the Korean Fair Trade Commission.  Ramifications for not registering may be severe.  Register your franchise and obtain a great business-savvy franchise agreement.

Prior to licensing your trademark to any individuals in Korea, please consider whether your relationship with the licensee is, actually, a franchise relationship.  Operating under a "license agreement" does not guarantee that the relationship is a mere license relationship.   Korea considers the reality of the relationship over the mere form of the agreement.

Please note that few lawyers, in Korea, are adept at franchise law.  Franchise law is a true specialty in Korea that requires a deep understanding of franchise jurisprudence in Korea and a working relationship with Korea's Fair Trade Commission.
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

Sean's profile may be found at: Sean C. Hayes